29 Biggest Tax Problems For Married Couples

Preparing your annual income tax return is a chore. It’s even more complex when you’re married. You might have two sets of income, assets, debts and deductions. Further, if you were separated, widowed or divorced during the year, you might have a thorny tax situation.

A qualified accountant can advise you on the basic tax problems that married couples face. For a brief introduction, read through to see 29 of the most significant tax problems married people might encounter. Understanding these challenges can help you get more tax breaks this year.

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1. YOU’RE NOT SURE OF THE YOUR MARITAL STATUS FOR THE TAX YEAR

When preparing taxes, you first need to determine your marital status. It might seem like a straightforward task. However, life is not always so simple.

The IRS considers you to be married if you were lawfully wed on the last day of the tax year. For example, if you tied the knot at any time in the past and were still married on Dec. 31, 2016, you were married to your spouse for the entire year in the eyes of the IRS. The laws of the state where you live determine whether you were married or legally separated for the tax year.

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2. YOU’RE NOT SURE OF YOUR MARITAL STATUS IN A SAME-SEX RELATIONSHIP

Married, same-sex couples are treated the same as married, heterosexual couples for federal tax purposes. However, same-sex couples in a registered domestic partnership or civil union cannot choose to file as married couples, as state law doesn’t consider those types of couples to be married.

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3. YOU DON’T KNOW WHICH FILING STATUS TO CHOOSE

If you weren’t married on Dec. 31 of the tax year, the IRS considers you to be single, head of household or a qualified widow(er) for that year.

If you were married, there are three filing possibilities:

  • Married filing jointly
  • Married filing separately
  • Head of household

If more than one category might apply to you, the IRS permits you to pick the one that lets you pay the least amount in taxes.

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4. YOU CAN’T DECIDE WHETHER TO FILE JOINTLY OR SEPARATELY

If you’re married and don’t qualify to file as head of household, you typically have two choices: filing jointly or separately. It’s best to choose the one that allows you to pay the least amount in taxes, which all comes down to your particular circumstances.

Sometimes it makes sense to file separately, said Josh Zimmelman, owner of Westwood Tax & Consulting, a New York-based accounting firm. “A joint return means that your finances are linked, so you’re both liable for each other’s debts, penalties and liabilities,” he said. “So if either of you has some financial issues or baggage, then filing separately will better protect your spouse from your bad record, or vice versa.”

If you file jointly, you can’t later uncouple yourselves to file married filing separately. “On the other hand, if you file separate returns and then realize you should have filed jointly, you can amend your returns to file jointly, within three years,” Zimmelman said.

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5. YOU ASSUME MARRIED FILING JOINTLY IS ALWAYS THE BEST OPTION

Even if married filing jointly has been your best choice in the past, don’t assume it will always be that way. Do the calculations each year to determine whether filing singly or jointly will give you the best tax result.

Changes in your personal circumstances or new tax laws might make a new filing status more desirable. What was once a marriage tax break might turn into a reason to file separately, or vice versa.

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6. YOU’RE NOT CLEAR ABOUT HEALTHCARE REQUIREMENTS

The Patient Protection and Affordable Care Act — more commonly known as “Obamacare” — requires that you and your dependents have qualifying health care coverage throughout the year, unless you qualify for an exemption or make a shared responsibility payment.

Even if you lose your health insurance coverage because of divorce, you still need continued coverage for you and your dependents during the entire tax year.

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7. YOU CHANGED YOUR LAST NAME

If you want to change your last name after a marriage or divorce, you must officially inform the federal government. Your first stop is the Social Security Administration. Your name on your tax return must match your name in the SSA records. Otherwise, your tax refund might be delayed due to the mismatched records. Also, don’t forget to update the changed names of any dependents.

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8. YOUR SPOUSE DIED DURING THE TAX YEAR

If your spouse died during the year, you’ll need to figure out your filing status. If you didn’t marry someone else the same year, you may file with your deceased spouse as married filing jointly.

If you did remarry during that tax year, you and your new spouse may file jointly. However, in that case, you and your deceased spouse must file separately for the last tax year of the spouse’s life.

In addition, if you didn’t remarry during the tax year of your spouse’s death, you might be able to file as qualifying widow(er) with dependent child for the following two years if you meet certain conditions. This entitles you to use joint return tax rates and the highest standard deduction amount.

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9. YOU FILE JOINTLY AND YOU’RE BOTH LIABLE

If you use the status married filing jointly, each spouse is jointly and severally liable for all the tax on your combined income, said Gail Rosen, a Martinsville, N.J.-based certified public accountant. “This means that the IRS can come after either one of you to collect the full amount of the tax,” she said.

“If you are worried about your spouse and being responsible for their share of their taxes — including interest and penalties — then you might consider filing separately,’ she said.

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10. YOU FILE SEPARATELY AND LOSE TAX BENEFITS

Although filing separately might protect you from joint and several liabilities for your spouse’s mistakes, it does have some disadvantages.

For example, people who choose the married filing separately status might lose their ability to deduct student loan interest entirely. In addition, they’re not eligible to claim the Earned Income Tax Credit and they might also lose the ability to claim the Child and Dependent Care Credit or Adoption Tax Credit, said Eric Nisall, an accountant and founder of AccountLancer, which provides accounting services to freelancers.

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11. YOU DON’T MEET THE MEDICAL EXPENSE DEDUCTION THRESHOLD

To include non-reimbursed medical and dental expenses in itemized deductions, the expenses must meet a threshold of exceeding 10 percent of your adjusted gross income. However, when you file jointly — and thus report a larger combined income — it can make it more difficult for you to qualify.

A temporary exception to the 10 percent threshold for filers ages 65 or older ran through Dec. 31, 2016. Under this rule, individuals only need to exceed a lower 7.5 percent threshold before they are eligible for the deduction. The exception applies to married couples even if only one person in the marriage is 65 or older.

Starting Jan. 1, 2017, all filers must meet the 10 percent threshold for itemizing medical deductions, regardless of age.

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12. YOU DON’T TAKE ADVANTAGE OF THE MARRIAGE BONUS

Many people complain about the marriage tax penalty. “Married filing jointly may result in a higher tax bill for the couple versus when each spouse was filing single, especially if both spouses make roughly the same amount of income,” said Andrew Oswalt, a certified public accountant and tax analyst for TaxAct, a tax-preparation software company.

However, you might have an opportunity to pay less total tax — a marriage tax break — if one spouse earns significantly less. “When couples file jointly with largely differing income levels, this may result in a ‘marriage tax benefit,’ potentially resulting in less tax owed than when the spouses filed with a single filing status,” Oswalt said.

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13. YOU’RE DIVORCED BUT STILL NEED TO FILE A FINAL MARRIED RETURN

If your divorce became official during the tax year, you need to agree with your ex-spouse on your filing status for the prior year when you were still married. As to whether you should file your final return jointly or separately, there is no single correct answer. It partially depends on your relationship with your ex-spouse and whether you can agree on such potentially major financial decisions.

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14. YOU HAVE TO DETERMINE THE STATUS OF DEPENDENTS AFTER A DIVORCE

Tax laws about who qualifies as a dependent are quite complex. Divorcing parents might need to determine which parent gets to claim the exemption for dependent children.

Normally, the custodial parent takes the deduction, Zimmelman said. “So if your child lives with you more than half the year and you’re paying at least 50 percent of their support, then you should claim them as your dependent,” he said.

In cases of shared custody and support, you have a few options. “You might consider alternating every other year who gets to claim them,” said Zimmelman. Or if you have two children, each parent can decide to claim one child, he said.

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15. YOU DEDUCT VOLUNTARY ALIMONY PAYMENTS

If you want to deduct alimony payments you made to a former spouse, it must be in accordance with a legal divorce or separation decree. You can’t deduct payments you made on a voluntary basis.

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16. YOU DEDUCT CHILD SUPPORT PAYMENTS

Even if you don’t take the standard deduction and instead itemize your deductions, you can’t claim child support payments you paid to a custodial parent.

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17. YOU CLAIM CHILD SUPPORT PAYMENTS AS INCOME

Do not report court-ordered child support payments as part of your taxable income. You don’t need to report it anywhere on your tax return. On the other hand, you must report alimony you receive as income on line 11 of your Form 1040.

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18. YOU DON’T CLAIM ALIMONY YOU PAID AS A DEDUCTION

Unlike child support that isn’t tax deductible, you are permitted to deduct court-ordered alimony you paid to a former spouse. It’s a deduction you can take even if you don’t itemize your deductions.

Make sure you include your ex-spouse’s Social Security number or individual taxpayer identification number on line 31b of your own Form 1040. Otherwise, you might have to pay a $50 penalty and your deduction might be disallowed.

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19. YOUR SPOUSE DOESN’T WORK AND MISSES TAX SAVINGS

Saving for retirement is important. Contribute to a 401k plan and you will both save money for your golden years and lower your taxable income now. If your employer offers a 401k plan, you can contribute money on a pretax basis, subject to certain limits.

However, nonworking spouses can’t contribute to a 401k because they don’t have wages from an employer.

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20. YOU MISS QUARTERLY TAX PAYMENTS

Single or married, you might have to pay quarterly tax payments to the IRS, especially if you are self-employed. Make sure you know how to calculate estimated taxes. If you are required to make such payments but do not do so, you might have to pay an underpayment penalty, Rosen said.

All taxpayers must pay in taxes during the year equal to the lower of 90 percent of the tax owed for the current year, or 100 percent — 110 percent for higher-income taxpayers — of the tax shown on your tax return for the prior year, Rosen said. “The problem for married couples is that often they do not realize they owe more taxes due to the combining of the two incomes,” she said.

You should be proactive each year. “To avoid owing the underpayment penalty, make sure to do a projection of your potential tax for 2017 when you finish preparing your 2016 taxes,” she said, adding that you should make sure to comply with the payment rules outlined above.

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21. YOU PHASE OUT OF PASSIVE LOSSES

Crystal Stranger — a Los Angeles-based enrolled agent, president of 1st Tax and author of “The Small Business Tax Guide” — said she sees a lot of married couples who have issues with passive loss limitation rules.

“With these rules, if you have a passive loss from rental real estate or other investments, you are allowed to take up to $25,000 of passive losses against your other income,” she said. “But this amount phases out starting at $100,000 (of) adjusted gross income, and is fully lost by $150,000 (of) adjusted gross income.”

Married filers lose out, as the phaseout amount is the same for a single taxpayer as for a married couple. “This is a big marriage penalty existing in the tax code,” Stranger said. “It gets even worse if a married couple files separately. The phaseout then starts at $12,500, meaning almost no (married filing separately) filers will qualify.”

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22. YOU CLAIM A CHILD AS A DEPENDENT, BUT YOUR INCOME IS HIGH

You are not obligated to claim your kids as dependents on your own tax return. In fact, it might be beneficial not to claim them.

“High earners lose the personal exemption after crossing certain income thresholds,” said Nisall. So in some cases, it might make more sense to let working children claim the exemption for themselves on their own return, he said.

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23. YOU MISS OUT ON THE CHILD TAX CREDIT

Married couples might be able to claim the Child Tax Credit up to a limit of $1,000 for each qualifying child.

“The Child Tax Credit phases out starting at $55,000 for couples electing to use the married filing separately filing status, and (at) $110,000 for those choosing the married filing jointly status,” said Oswalt. “But married couples receive twice the standard deduction that individuals receive, so the phaseout limitations may not negatively impact a married couple’s return if they choose to file jointly.”

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24. YOU NEGLECT THE TAX BREAK FROM A HOME SALE

The IRS provides a tax break when you sell your home, subject to certain conditions. Generally, you must meet a minimum residency period by owning and living in the house for two of the five years previous to the sale.

A single person who owns a home that has increased in value can qualify to exclude up to $250,000 in gains from income, said Oswalt. However, married people can exclude up to $500,000 in gains. This rule can become tricky if one person in the couple purchased the house prior to marriage.

“If you are married when you sell the house, only one of you needs to meet the ownership test for the $250,000 exclusion,” Oswalt said. “You both must meet the residency period to exclude up to the full $500,000 of gain from your income, however.”

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25. YOU DON’T CLAIM THE CHILD AND DEPENDENT CARE CREDIT

Married tax filers might be eligible for the Child and Dependent Care Credit if they paid expenses for the care of a qualifying individual so that they could work or look for work. The rules for who can be a dependent and who can be a care provider are strict. This credit is not available if you file separately.

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26. YOU CAN’T DEDUCT STUDENT LOAN INTEREST

If you’re paying back student loans, you might be looking forward to taking the student loan interest deduction. However, if you’re married, it might not be so easy to do that.

“For a single filer, the deduction begins to phase out when the taxpayer’s adjusted gross income is greater than $65,000,” said Oswalt. “This amount is doubled to $130,000 when filing jointly.”

“So if both spouses are making $65,000 or less, then their deduction will not be affected by the phaseout,” he explained. “However, if one is making $60,000 and the other $75,000, the deduction begins to phase out, which will ultimately result in a larger tax bill.”

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27. YOU INCORRECTLY ACCOUNT FOR GAMBLING WINS AND LOSSES

Imagine a married couple where both spouses like to gamble in Las Vegas. He’s not so lucky and has losses, while she has winnings. If they file a joint return, they might have to report the gambling winnings as taxable income. Meanwhile, the losses might be deductible if the couple itemizes their deductions instead of taking the standard deduction.

However, they can’t take the amount of gambling winnings, subtract the losses and claim the net amount as winnings. Instead, they must report the entire amount of gambling winnings as income, whereas the losses are reported as an itemized deduction up to the amount of the winnings. The IRS requires you to keep accurate records of your winnings and losses.

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28. YOU BECAME A VICTIM OF TAX IDENTITY THEFT

Identify theft is a financial nightmare, no matter how it happens. Tax identity theft happens when someone files a tax return using one or both of the spouse’s Social Security numbers in hopes of scooping up your legitimate refund. If this happens to you, “contact the IRS immediately and fill out an identity-theft affidavit,” said Zimmelman. “You should also file a complaint with the Federal Trade Commission, contact your banks and credit card companies, and put a fraud alert on your and your spouse’s credit reports.”

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29. YOU CAN’T GET YOUR 2015 RETURN

The IRS and state tax agencies work to develop safeguards to avoid identity theft related to tax returns. In 2017, they will be particularly concerned about the implications of taxpayers who file using tax software.

The IRS has alerted taxpayers that they might need to have their 2015 adjusted gross income handy if they are changing software products this year. This number might be required to submit your return electronically.

Getting your 2015 adjusted gross income might be difficult if you are a member of a divorced couple that is not on positive terms, or that hasn’t even been in contact the past few years.

However, you still have options. You might be able to get the information if you go to the IRS website and use the Get Transcript service.

 

 

Written By: Valerie Rind
Source: GOBankingRates

5 Steps to Save Your Financially Stressed Marriage

Do money troubles have you feeling like your marriage is circling the drain?

Don’t give up on your spouse yet!

Even financially stressed marriages can be salvaged, although it’s not always easy. Your family’s unique circumstances will determine how best to approach — and solve — money problems, but here are five steps to get you started.

Step 1: Air out your financial dirty laundry

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You’re upset that he spends an obscene amount with his friends each week, and he may be furious that you nit-pick every purchase he makes. Get it all out.

In my mind, this may be the most important step. You can’t move forward positively until you get rid of all the resentment and anger that linger over past mistakes.

“Bring everything to the table,” advises Anne Malec, a licensed marriage and family therapist and author of “Marriage in Modern Life.” “You need real openness and honesty to address the issue. Both sides need to be accountable.”

Well, you think, this surely sounds like a perfect recipe for a knock-down, drag-out fight. And you’re right. It can go horribly wrong, so you need to go about this carefully.

The best way is to go to a third party – a therapist, a financial planner, a pastor – who can act as a mediator for this emotional discussion.

If you believe that isn’t possible, you need to think long and hard about when and how best to bring up the subject with your spouse. Pick a low-key time and drop the accusatory tone. Use “I” statements whenever possible and take a soft approach to opening the discussion.

As in:

I feel frustrated that our bank account is always overdrawn. What can we do about that?

Not:

You need to man up, think of the family and stop spending so much!

Regardless of how nicely you put it, be prepared for them to respond with something critical about you and then seriously consider whether it has any merit. Remember you’re probably not perfect either, and you can’t make headway if you can’t admit your shortcomings.

Step 2: Have a monthly money meeting


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So now that you’ve cleared the air, it’s time to keep the lines of communication open. The best way to do that is to have a monthly money meeting.

“You look at how you’re doing this month compared to last month,” Malec says. “You work jointly as partners to address upcoming expenses.”

Step 3: Create a budget together

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If your finances are in the toilet, chances are you don’t have a budget. Or if you do have a budget, it’s one that one spouse created and then decreed the other spouse follow.

You need to identify your shared vision for what your family will look like. What are your goals? What are your priorities? Then work together to create a budget that supports those dreams.

Step 4: Give each spouse their own spending money

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Your budget isn’t done until it includes a little cash for each spouse to spend freely each month.

“Each couple gets an equal amount and gets to spend it without criticism or question from the other,” Malec says.

This is so important because spending is such a huge piece of the financial happiness puzzle. Zero spending cash can make a spouse feel stifled or controlled while unbridled spending can spell bankruptcy.

According to a survey conducted by Edelman Financial Services, 56 percent of those polled said spending was the main reason for money-related divorces. So agree that each partner can spend, within reason, and remember that you don’t get to say anything about how your better half uses their cash, even if you do think it’s ridiculous to blow $50 on pizza and beer.

Step 5: Commit to being a team

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Did you play a team sport in school? Do you remember what that was like?

You may have had one particular teammate who didn’t do such a great job. They might make a mistake and cost the team a point, but assuming you were a good team player, you’d still pat them on the back and tell them it was OK.

You need to have that same team attitude with your spouse. Don’t think of them as an adversary or an obstacle you need to overcome. Instead, play to their strengths and be their biggest fan, even when they make mistakes.

“A person who doesn’t want to talk about [money] may feel uneducated about money, may feel anxious about money or don’t want to be held accountable,” Malec says.

You need to figure out what’s going on with your spouse and develop a game plan to address it without making them feel like a total loser. Malec adds that those who become defensive or angry over money probably didn’t see healthy financial discussions growing up and may just be modeling bad behavior they witnessed as children.

Saving a financially stressed marriage involves a lot of hard work and compromise, but for those who come out the other side in happier marriages with better finances, the sacrifices are well worth the rewards.

Written by Maryalene LaPonsie of MoneyTalksNews

(Source: MoneyTalksNews)

15 Ways to Retire Earlier

© Provided by GoBankingRates
© Provided by GoBankingRates

The word “retirement” and number “65” are as linked in the American psyche as “bacon” and “eggs.” Then again, that all depends on how fast you want your eggs, right?

Retiring early — or leaving the work force for the golf course, if you like — might sound like an unattainable goal. But there are many ways to make it, so long as you take numerous approaches into account.

Yes, 65 is the standard — but what’s 21st century life all about if not exceeding standards? Here are 15 major financial and lifestyle moves you can make to achieve this goal.

Are you fantasizing about early retirement. Here’s how to make that dream a reality.

1. LIVE TWO TO THREE TIMES BELOW YOUR MEANS

Sorry, folks: Simply skipping that $4 latte in the morning ain’t gonna cut it. It takes a much more committed approach where “sacrifices” are viewed in a new light. “It’s amazing when I work through the numbers that some people think manicures, landscapers and maids are a need,” said Michael Chadwick, a certified financial planner and CEO of Chadwick Financial Advisors in Unionville, Conn.

2. REDEFINE ‘COMFORTABLE RETIREMENT’

Less spending later constitutes the flip side of less spending now. If you imagine comfy retirement as a vacation home and monthly cruise ship trips, revisit that vision so you don’t have to bleed cash — but can still retire in style. Instead of two homes, for example, why not live in your vacation destination and pocket the principal from selling your primary residence?

3. PAY OFF ALL YOUR DEBT

That’s right, all of it. First: Is it time to pay off your home? You might not have the resources now to plunk down one huge check, but consider savvy alternatives such as switching from a 30-year to 15-year mortgage. Monthly payments aren’t much higher, but the principal payoff is much greater. Second: Do the same with loans and credit cards, as high interest eats up income faster than termites chewing a log. A credit card balance of just $15,000 with an APR of 19.99 percent will take you five years to eradicate at $400 a month — and you’ll dish out a total of $23,764.48, the calculator on timevalue.com shows.

4. CONSIDER OVERLOOKED FINANCIAL RESOURCES

While it’s risky to count on unknowns such as an inheritance, you might have cash streams available outside the traditional retirement realm, said Jennifer E. Acuff, wealth advisor with TrueWealth Management in Atlanta. For example, “Understand your options with respect to any pensions you might be entitled to from current or previous employers.”

5. INVEST EARLY AND AGGRESSIVELY

If you’re in your 20s and start investing now, you’re in luck, said Joseph Jennings Jr., investment director for PNC Wealth Management in Baltimore. “Due to the power of compounding, the first dollar saved is the most important, as it has the most growth potential over time.” As an example, Jennings compares $10,000 saved at age 25 versus 60. “The 25-year-old has 40 years of growth potential at the average retirement age of 65, whereas $10,000 saved at age 60 only has five years of growth potential.”

6. MARRIED COUPLES: PLAY RETIREMENT ACCOUNT MATCHMAKER

The wisdom of taking advantage of a company match on the 401(k) is well established — but think about how that power is accelerated if a working couple does it with two such company matches. “If your employer has a matching contribution inside of your company’s plan, make sure you always contribute at least enough to receive it,” said Kevin J. Meehan, regional president-Chicago with Wealth Enhancement Group. “You are essentially leaving money on the table if you don’t.”

7. PRACTICE SOUND CASH FLOW MANAGEMENT

The methodology is simple, yet the results can be profound: Put money at least monthly into systematic investments during your working years. “There’s no other element of investment planning or portfolio management that’s more essential over the long term,” said Jesse Mackey, chief investment officer of 4Thought Financial Group in Syosset, N.Y.

8. JUMP ON EMPLOYER STOCK PURCHASE PLANS

How about some free money? The ESPP typically works by payroll deduction, with the company converting the money into shares every six months at a 15 percent discount. If you immediately liquidate those shares every time they’re delivered, it’s like get a guaranteed 15 percent rate of return,” said Dave Yeske, managing director at the wealth management firm Yeske Buie and director of the financial planning program at Golden Gate University. “Add the after-tax proceeds to your supplemental retirement savings.”

9. START THAT RETIREMENT ACCOUNT TODAY

That is, the earlier the better. Millennials who kick off retirement accounts early will reap big rewards later. A 25-year-old who socks away $4,000 a year for just 10 years (with a 10 percent annual return rate) will accrue more than $883,000 by the time she turns 60. Now then: Can’t you just taste those pina coladas on the beach?

10. PLAN SMART VACATIONS AND TRAVEL — AND INVEST THE DIFFERENCE

There’s no sense in depriving yourself of every single thing, especially well-deserved time off. But Yeske points out that you can save a ton in 150 countries through a service called HomeExchange.com. “My wife and I have stayed for free in London, Amsterdam, New York and Costa Rica,” he said. “And when you’re staying in someone’s home or apartment, you don’t have to eat out at a restaurant for every meal, so your food costs nothing more than if you were at home.”

11. DON’T LET YOUR MONEY SIT IDLE

To get to an early retirement, you have to periodically revisit your IRA, 401(k) or other retirement account to make sure your money doesn’t grow cobwebs. For example, the way your retirement account is diversified shouldn’t put too much emphasis on low-yield investments — such as money market funds and low-yielding bonds. “Dividends can pile up in the money market account, typically earning one one-hundredth of a percent,” Yeske said. “Make sure your cash is invested properly.”

12. HOP OFF THE HEDONIC TREADMILL

In this curse of consumerism, you buy something expensive, feel excited and then scout for something else to purchase when the “new car smell” wears off. And it’s a huge trap if you want early retirement, said Pete, a finance blogger who retired in his 30s. Another advantage: “Here in the rich world,” he wrote at MrMoneyMoustache.com, “the only widespread form of slavery is the economic type.”

13. LOOK FOR PASSIVE SOURCES OF INCOME

Early retirement doesn’t necessarily mean retiring all of your income, especially if you find ways to bring in money without hard work. Investing in rental properties is one way you can create a cash flow stream — and you can minimize the labor by hiring a property manager. Or: Set up an internet sales business and hire a part-timer to fulfill orders and track stock based on volume.

14. ENLIST IN THE ARMED FORCES

Here’s an alternative way to get to “At ease, men.” By serving in the military, you can also serve yourself. Members commonly retire after 20 years, living off generous pensions and health insurance. Even though President Obama in March proposed sweeping changes to military retirement and health benefits, earlier-than-normal retirement should still remain an option for many men and women in uniform.

15. HIT THE ROAD OR GO JUMP IN A LAKE, INDEFINITELY

Some middle agers are selling the bulk of their possessions — including the home — and moving into tricked-out mobile homes and houseboats. These options also open the door to a life of leisure travel and can eliminate major expenses, such as property taxes and mortgage payments.

If you think of retiring early as simply walking away from everyday life — and thus a pipe dream — it’s time to take a step back and look at how others have done it. You might enjoy your job immensely and have friends in the trenches with you. But if work is taking too much away from your family time, community bonds, overall health and peace of mind, you might do well to consider one of the smartest alternative investments of all: yourself.

Written by Lou Carlozo of GoBankingRates

(Source: GoBankingRates)

10 Things You Should Know about Joining Finances in Marriage

© Nick M. Do/Getty Images
© Nick M. Do/Getty Images

Money and love. Such powerful subjects on their own; combined, they can be explosive. So, when it comes to love, money and relationships, aren’t couples who pool their finances just asking for trouble?

There are plenty of couples who insist that keeping their finances separate is a key to their happy relationship. Some of the benefits, they say, are:

  • Each spouse gets some privacy and independence.
  • There’s less reason for conflict.
  • No one’s looking over your shoulder at your spending.

Most couples pool their money

All of that makes sense to me, so I was surprised to learn that most married couples in the United States do pool their finances. Still, that doesn’t mean that it makes them happier, does it?

“What has research turned up on the subject?” I wondered. I was in for another surprise: Research seems generally to show that pooling money in marriage makes a relationship more likely to last. Of course every relationship and circumstance is different, and there are good reasons why not every couple should pool their finances.

But, by and large, the jury seems to be in: Sharing is a good thing. Here’s what researchers and impassioned advocates have to say about pooling money in a marriage.

1. SEPARATE MONEY IS LINKED TO MORE BREAKUPS

For married couples, at least, “results show a strong association between moving money out of joint accounts, and consistently keeping money separate, and couple breakup,” say the authors of Money, Honey if You Want to Get Along With Me: Money Management and Union Dissolution in Marriage and Cohabitation, a 2010 report examining research about money sharing in marriage. The study was funded by the nonprofit National Center for Family & Marriage Research.

Most American couples pool their funds, the report says. And yet, in some subgroups the opposite is true. Separate money is the rule among:

  • African-American couples.
  • People who have remarried.
  • Unmarried couples living together.

2. SHARING CONTROL IS A GOOD THING

Another study funded by the same research center finds that sharing power, among other things, is good for marriage. And, as everyone knows, money is power. Here’s what Married Couples’ Communication and Resource Management Behaviors: Implications for Relationship Well-Being, says:

“Overall, respondents tended to report more positive relationship adjustment when they and their partner pooled their money together, shared control of their money, engaged in more frequent financial management and positive communication behavior, and engaged in less frequent demand/withdraw behavior.”

3. BUT YOU HAVE TO SHARE EQUALLY

Pooling money can cause problems if you’re not sharing equally, writes Maryalene LaPonsie, in 7 Money Mistakes That Can Mess Up Your Marriage:

“[P]lease, whatever you do, don’t divide your spending money as a percentage of your respective incomes. I’d wager that nothing chips away at the foundation of a marriage quite like placing a value on your spouse based upon what they earn.”

4. MONEY FIGHTS HAPPEN REGARDLESS

Slate writer Jessica Grose polled 6,000 readers to learn about couples’ approaches to money and relationships. She found only “negligible differences in the amount of fighting among couples who pooled all their money, some of their money, and none of their money.”

5. SHARING FORCES YOU TO COMMIT

And committing “can itself create more love,” says Bloomberg writer Megan McArdle:

“The harder it is to disentangle yourself, the harder you will work to enjoy what you have. The act of trusting everything to another person is the act of looking for all the reasons that they are trustworthy — accentuating the positive.”

6. SEPARATE MONEY UNDERMINES THE FINANCIAL BENEFITS OF MARRIAGE

Before romantic love became a big reason for marriage, people married for practical reasons like physical security, financial stability, more prosperity for rearing children and the financial benefits of shared labor and shared overhead. The practical stuff may not be everything today, but it still counts for a lot.

If you de-couple money from marriage you eliminate much of the financial value of marriage, says writer James E. McWhinney at Investopedia.

7. SHARING YOUR MONEY MAKES YOU HAPPY

Bloomberg writer McArdle talked with Michael Norton, who co-wrote the book “Happy Money:”

“[M]uch of Norton’s research shows that we actually enjoy giving to other people more than we enjoy spending money on ourselves. We don’t think that’s the case — most people predict that they’ll enjoy selfish spending more. But when he actually gave them money to spend, and asked them to rate the experience, they rated the money they spent on other people more highly than money spent on themselves.”

One reason sharing your money with your spouse is satisfying, McArdle theorizes, is that:

“… when you put all your money at your spouse’s disposal, it is something like giving the gift of all of your income. Of course, this only works with a spouse who gives that gift right back.”

8. SOME COUPLES SHARE, BUT NOT EVERYTHING

TD Bank surveyed about 1,000 Americans — married or co-habiting — to learn how they structure their bank accounts. It found that 42 percent have both joint bank accounts and also individual accounts.

Their reasons:

  • 38 percent (43 percent of women and 34 percent of men) said they like the independence.
  • 28 percent said their separate accounts were for emergencies and personal spending.
  • 16 percent like the convenience and say separate accounts make budgeting and bill paying easier.
  • 7 percent said they like the privacy.

9. THERE’S ROOM FOR EXCEPTIONS

Here’s a crucial exception to the principle of shared money: Keep at least one credit card and one bank account in the name of each spouse. That way, if your spouse dies or becomes incapacitated, or if you divorce (not that you’re planning on it, but it happens) you won’t be locked out of the ability to, for example, borrow money, buy a home, open a credit card or make a major purchase.

Bloomberg writer McArdle offers some other exceptions: “[I]f you have an inheritance you want to keep separate, or your spouse is a potential defendant in a nasty lawsuit, then there may be good reasons for separate accounts.”

10. POOLING FUNDS DOESN’T STOP FINANCIAL INFIDELITY

Pooling your money can have benefits, but it doesn’t make your marriage immune to problems. Three in 10 people who combined their finances with a partner admitted they had lied to their partners about money, found a survey conducted by Harris Interactive that was commissioned by the National Endowment for Financial Education. Another 32 percent said that they’d been lied to by partners about money.

Financial infidelity is an equal-opportunity sin. The liars were from both genders and all income groups. Among common money lies in relationships:

  • 30 percent hid a statement or a bill.
  • 16 percent hid a major purchase.
  • 15 percent kept a secret bank account.
  • 11 percent lied about debt.
  • 11 percent lied about how much they earned.

The last word

The last word goes to Washington Post money columnist Michelle Singletary. She is an outspoken, unapologetic advocate for shared accounts. Here’s her advice to her readers who asked about sharing money in marriage:

Lots of people have separate accounts because they don’t believe in “our money.” But me, I say put it all in one pot. Pay the bills together from that one pot and stop all the bickering about who should pay what or how much each should contribute based on what each makes. Selfish way to go into a marriage. In my opinion.

Written by Marilyn Lewis at Money Talks News

(Source: Money Talks News)

How to Talk Money with Your Spouse

Ugh. You know you should talk to your spouse about money, but every time you do, someone gets angry, feelings get hurt and you promise yourself you’ll never bring up the subject again.

Am I right?

OK, I’m sure some of you can talk money like a pro with your spouse, but I’m willing to bet a whole bunch of you dread the thought. I’m a saver who used to be married to a spender. I know.

Even though you may think it’s a lost cause, you still need to try to keep the lines of communication open. Edelman Financial Services found 44 percent of surveyed couples believe money is the root cause of most divorces.

“Financial pressures can lead to the breakdown of the family,” David Bach told me. Bach is the vice chairman of Edelman Financial Services and author of “Smart Couples Finish Rich.”

His research found that being on the same page financially with a spouse not only helps keep you out of divorce court, but it can also fatten your bank account. Of those who discuss finances with their spouse, 36 percent have savings of $100,000-$499,000.

How do you have healthy money conversations with your spouse? Here are five suggestions from the experts.

1. Make it a scheduled event

A woman writes in her calendar.

© altrendo images/Getty Images A woman writes in her calendar. 

The problem with most money discussions is that they usually arise when there is a problem. When one person says, “Honey, can we talk about the budget?” the other person may instantly think, “Ugh, what’s wrong?” Or they may assume they’re in trouble for spending too much.

Either way, it puts the other person on the defensive or in a foul mood right from the get-go.

Instead, agree on a specific day for a monthly review of the family finances. It could be the first Friday of the month or on each payday. It doesn’t have to be long or involved either. It could be as simple as 10 minutes spent going over last month’s cash flow and identifying major or periodic expenses coming down the pipeline.

A regular meeting gets both spouses on the same page financially and ensures they both take ownership of family finances. I asked Anne Malec, a licensed marriage and family therapist and author of “Marriage in Modern Life,” what she thought was the biggest mistake couples make when having money conversations.

“It’s probably the feeling that it’s one partner’s issue to solve [money] problems,” she told me. However, a monthly meeting takes the burden off one spouse to work alone to balance the budget.

2. Pair it with something fun

A couple chats during a dinner date.

© Portra Images/Getty Images A couple chats during a dinner date. 

To sweeten the appeal of a monthly money discussion, pair it with something fun. Bach is a fan of “money dates” and notes that he has clients who always follow up their appointments with him with a movie or dinner out.

“My really happy couples don’t look at their money as drudgery,” he explains. Instead, they use financial meetings as an excuse for a night out.

You don’t have to see a financial planner to make a money date work for you. Simply plan to have your money conversation at your favorite restaurant or if that’s too extravagant for your budget, follow up an at-home money talk with a rented movie and homemade treats.

The point is, make it fun so your spouse doesn’t think of the money talk as work. They might still not love the idea, but they may be willing to endure it with a smile because they know something good is happening afterward.

3. Focus on goals, not bills

A stack of bills.

© Jupiterimages/Getty Images A stack of bills.

Another tip that can make money talks less painful is to focus on shared goals, not everyday bills. Bach suggests couples open a dream account where money can be put aside for a vacation, travel or some other family priority.

“Money is just a tool to design your best life,” Bach says.

Rather than focus on how little you may have, focus on how to make the best use of it. By talking about goals, you’ll naturally bring in a discussion of bills as well. For example, if you and your spouse want to take an anniversary trip, you both may be more likely and willing to cut back in other places.

4. Bring in a third party if needed

A couple meets with a financial planner.

© Paul Simcock/Getty Images A couple meets with a financial planner. 

Sometimes your bad money habits are so ingrained that bringing in a third party to air out the topic is necessary. You could use a marriage and family therapist like Malec or a financial planner like Bach. Or you could go a different route if that’s not in the budget or if your better half balks at the idea of talking about money problems with a stranger.

Bach suggests working through a financial book or workbook together or attending a financial seminar to jump-start the discussion. In my situation, I told my husband I’d like us to attend Dave Ramsey’s Financial Peace University program as a Christmas present. Was he happy to go? No. Did it change our family finances and marriage? You bet.

5. Understand your partner’s perspective

A young couple looks over their expenses.

© Richard Elliott/Getty Images A young couple looks over their expenses. 

Finally, talking about money with your spouse requires a great deal of patience and empathy. Your spouse probably isn’t purposefully being difficult. They simply may have a different understanding of money and different expectations than you.

“Each [spouse] has money beliefs about how it’s all going to work,” Malec says. “These beliefs aren’t articulated but they are acted out.”

So while your spouse’s money habits might get on your last nerve, remember that they are probably only doing what they saw modeled at home growing up. Or at least give them that benefit of the doubt.

“You’re in this together,” Bach says. Once you start playing the blame game, you stop working as a team. And once you stop working as a team, you might find yourself agreeing with the 44 percent of people who say divorce and money disagreements go hand-in-hand.

Written by Maryalene LaPonsie of Money Talks News

(Source: Money Talks News)

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